The difference between National Living Wage and National Minimum Wage

The National Living Wage is set to change in April 2017... or was it the National Minimum Wage? There seems to be confusion between the two, so here's an explanation – with the Living Wage thrown in as an extra. Prepare to be bewildered.

What's the difference between the two anyway?

AD

British employers and staff alike have recently found themselves confused with the terms Living Wage, National Living Wage and the National Minimum Wage. We wanted to provide some clarification on what they meant.

The National Minimum Wage

The NMW is exactly as it sounds. It is the minimum pay per hour workers are entitled to by law and is reviewed yearly by the government. The rate for each age group in the UK is different and has been regulated by the Low Pay Commission since 1999.

Of course, workers need to be of school leaving age (16) to receive the benefits of the NMW. In 2016, those aged 18 and under were entitled to £4 per hour, 18 to 20-year-olds were allowed £5.55, 21 to 24-year-olds got £6.95 an hour and those over 25 received £7.20 of hourly wages.

This rate changes every October and for those under the age of 25, the minimum wage will change accordingly this year.

YEAR

25 AND OVER

21 TO 24

18 TO 20

UNDER 18

APPRENTICE

2017

£7.50

£7.05

£5.60

£4.05

£3.50

The National Living Wage

This is the point where people get confused. Despite using the term Living Wage, the NLW has nothing to do with it (further explained below). It’s basically a new minimum wage rate – the NMW rebranded if you like. Exactly the same thing with a different name.

Promoted Content

The first hop in pay is set to take place on April 2017, whereby the current rate of £7.20 will increase to £7.50 an hour. In 2018 you’ll need to pay staff £8.05, followed by a £8.50 hourly rate in 2019. As a result of this, some one million workers will directly receive a pay rise.

The Living Wage

The Living Wage shouldn’t be confused with the government’s National Living Wage – one difference being that it isn’t enforceable by law. Companies can voluntarily adopt it, but know that it means paying a higher sum of money to staff.

The Living Wage rate currently stands at £8.45 an hour, with the London Living Wage separately calculated as being £9.75 per hour. And while the Living Wage Foundation welcomed the government’s NLW, it claimed the lowest level of pay currently estimated for a comfortable London life was already higher than what the NLW will be in 2020.

The National Living Wage (NLW) has now been in place for just over three months. But welcome though the raising wage floor for over-24s may be, it constitutes a cost to employers, recent research suggested.